Our methodology: how we choose the best secured cards
Best overall secured credit card
Having the distinction of being the only secured card on the market to offer cash back rewards, the Neo Card (Secured) offers 5% cash back on purchases made with participating Neo partners and 1% on everything else (up to a $5000 limit per month).
There’s no annual fee to pay, and its minimum security deposit of only $50 makes it quite possibly the most accessible card on this list. Other great features include the ability to increase or decrease your credit limit on demand, an insights dashboard through their app which you can use to track spending, and an auto-pay feature to ensure you never miss a bill while you’re trying to get your credit on track.
The only visible drawback here is their purchase interest rate. While its low end sits comfortably at a standard 19.99%, it can reach as high as 26.99% depending on your credit application and province, so read the fine print on your contract and make sure you’re getting a rate you can live with.
- No annual fee
- Only secured card on the market with cash back rewards - earn 5% on store purchases with Neo retail partners and 1% on everything else
- Increase or decrease your credit limit on demand
- Insights dashboard helps you keep track of your spending
- Auto-pay feature keeps you from missing bills
- Very low minimum security deposit of $50
- No hard credit check, excluding Quebec applicants (hard credit inquiries may have a negative impact on your credit score)
- Purchase interest rate can go as high as 26.99% depending on your application and home province
Best no fee secured credit card
The Home Trust Secured Visa Card is a no-frills card perfect for those looking to build their credit without the added pain of an annual fee. With a minimum deposit of $500, users can activate the card and make purchases virtually anywhere, with Home Trust sending regular reports to both major credit bureaus (Equifax and TransUnion). The card’s interest rate of 19.99% is fairly standard (although there are other secured cards who offer lower rates) and for -those using the card abroad or online, its 2% foreign exchange fee is lower than you’d normally find on a card of this type.
Those willing to fork out $59 for an annual fee can see their interest rate lowered to a very impressive 14.90%, but that may be a big ask for clients still trying to get on their feet financially.
While it may not feature any of the perks or rewards of other cards, those who use it responsibly will find it helpful as they build up their credit and graduate to an unsecured credit card in the future.
- No annual fee
- Low foreign exchange fee of 2%
- Reports to both Equifax and TransUnion
- Interest rate of 19.99% is standard for most credit cards, but there are cards with lower interest rates on the market right now
- Interest rate of 14.90% is available, but you’ll have to pay an annual fee of $59 as well
- Very bare bones - users won’t earn any rewards or cash back and there’s no perks
better choices made
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How does a secured credit card work?
Once you’ve made your security deposit and completed activation, a secured credit card works just like any other - you can use it to make any in-store or online purchases you wish. And, just like a regular credit card, you’ll get a bill every month that you’ll be expected to pay on time. Whether you pay off the full balance or make the minimum payment is your decision, but it’s important to remember that a secured card’s main purpose is to help you build your credit, so try to ensure your payments are always on time.
The provider of the card should then report your payments to credit bureaus such as Equifax and TransUnion which, if you’re using the card responsibly, will slowly improve your credit score as you continue to use the card. On that note, it’s important to ensure that your issuer does report to credit bureaus, as some don’t.
How to get a secured credit card?
The great thing about secured credit cards is that nearly anyone is eligible to get one. Because these cards are geared towards young people with no credit history, newcomers to Canada, or those trying to build back their credit after a bad financial period, they are incredibly easy to be approved for and often don’t require a minimum personal income or hard credit check. That being said, there are a few basic requirements:
- You must be the age of majority in your home province or territory
- You must be a resident of Canada
- You must be able to pay the minimum security deposit for activation
What to consider in a secured credit card?
Credit bureau reporting
Most people want a secured credit card for the same reason: to build or rebuild their credit and eventually graduate to an unsecured credit card. Knowing this, it’s incredibly important to ensure that the card’s provider reports to at least one Canadian credit bureau (but ideally both - Equifax and TransUnion). Your credit score can’t improve if these organizations aren’t seeing and recording your regular payments, so make this your top priority.
Minimum security deposit
Secured credit cards match your credit limit to the amount you’ve put down as a security deposit, but if their minimum deposit (some can be as high as $500) is more than you can afford, you may want to look at other, less-prohibitive secured cards. After all, that money will be tied up until you close the account, so ensure that it’s an amount you can afford to live without for an indefinite amount of time.
Annual and monthly fees
Because you’re using this card to help you get into a better financial situation, high annual and monthly fees aren’t your friend. Ideally, seek out a secured card with either no fees or very low ones. A card like this may not offer rewards or ultra-low interest rates, but if you’re serious about using it to improve your credit, neither of these features will be a factor.
How to apply for a secured credit card?
Depending on your financial institution, you may not see secured credit cards visibly offered on their website. Many larger banks do offer these cards, but you may have to call them or visit a branch in person to apply. Alternately, smaller financial institutions will typically make their secured credit cards available to apply for online. In this case, the process is quite easy.
- Select the card you wish to apply for
- Read the card's terms and conditions and accept
- Submit your personal information (name, address, social insurance number, employment, etc.)
- Wait to hear if you're approved. If so, you'll need to deliver your security deposit by cheque or bank transfer to active the card.
In the case that you're not approved, don't jump the gun and apply for another card again immediately. Each credit card application involves a hard credit check, and too many at once will hurt your credit score and further reduce your likelihood of being approved for future cards. With this in mind, wait a period of six months before applying again.
Tips for using a secured credit card
Have your deposit ready
You can’t begin using your secured credit card until you deliver your security deposit to the provider, and there’s usually a specific window of time to do that. If the deadline passes you by, you’ll lose your card before you even get a chance to use it.
That’s why it’s important to have your security deposit together and ready to send before you even apply. If the card you want requires a higher-level minimum deposit ($400 or $500) that you don’t immediately have on-hand, either take the time to save up before applying or consider looking at more accessible cards.
Use the card responsibly
While it may be exciting to have a brand new credit card, it’s important to remember the end goal: improving or building your credit. Because you won’t be able to effectively do that if you spend recklessly or go over your credit limit, using your card responsibly is important.
Use the card for a few small purchases per month. Not only will this keep your account active, it will ensure you’ll be able to pay your monthly bill off in full. Do this enough times, and you’ll slowly see your credit score improve.
Pay bills on time and in full
Providers of secured credit cards report your payments to the credit bureaus who assign you a score, so make sure your payments are never missed and on time.
And, while you can certainly choose to pay the minimum every month (after all, it’s your own money), you’ll be running the risk of accumulating interest the more you do this. If your card has a standard interest rate of 19.99% or thereabouts, this will slowly begin to ruin any progress you’ll be making with your credit, so it’s worth it to pay your bills in full whenever you can.
Monitor your credit score
Because you most likely own a secured credit card to help build your credit score, it’s worth keeping a regular eye on your progress. Sign up with Equifax or TransUnion and request your credit report monthly to see how you’re doing. Not only can you get the thrill and encouragement of seeing your score rise, you can also quickly identify and diagnose any issues that are preventing it from improving.
Secured credit cards - pros and cons
- They’re a great way to build or rebuild your credit
- Your credit limit is matched to the amount of your security deposit, eliminating the risk of overspending and winding up in debt
- Nearly anyone can be approved for one, even those with bad or nonexistent credit history
- You can sometimes earn small rewards as you spend
- Annual or monthly fees can counteract your efforts to get financially stable
- High purchase interest rates can become a problem if bills aren’t paid on time
- Minimum security deposits can be prohibitive (sometimes as high as $500 up front) and you won’t be able to get it back until your account is closed
What is a secured credit card?
A secured credit card works just like a regular, unsecured credit card, with one exception: it requires an upfront security deposit for activation. Typically, your credit limit will be the same amount as your deposit, so if you put up $600, that will be the limit on your card.
This deposit is for the provider's benefit and acts as a sort of collateral in the event that you don't pay your statement. Because of this, the risk on the providers' end is greatly reduced, and the card is much easier to be approved for as a result. This is the main reason why secured credit cards are ideal for users trying to build or repair their credit.
What is the best secured credit card?
Our pick for best overall secured credit card is the Neo Financial Secured Mastercard. Not only is it the only secured card on the market to offer cash back rewards, it also gives you the ability to increase or decrease your credit limit on demand, provides you with an insights dashboard to track your spending, and gives you an auto-pay feature so you'll never miss a bill.
With no annual fee and a very low minimum security deposit of $50, it's also the most accessible card on our list.
How will a secured credit card help me rebuilt my credit?
Unlike prepaid credit cards, secured credit cards report your payments and credit behaviour to Canadian credit bureaus, who track your credit history and assign you a score. This is what lenders will use to decide whether to approve you for unsecured credit cards, mortgages, personal loans, and lines of credit.
The more you use your secured card responsibly (using the card, paying bills on time, staying within your limit, etc.), the better your reports to the credit bureaus will be, slowly resulting in your credit score getting higher until you can move on to an unsecured credit card.
Why should I get a secured credit card?
Secured credit cards are a great option for people who have no credit history or who need to repair their existing credit history; they can also be great for immigrants who are new to Canada. Whether it’s your first credit card or a way to fix your credit history, secured credit cards allow you to use a credit card and prove to lenders that you can be a responsible borrower.
What are the disadvantages of secured credit cards?
While secured credit cards can be great for building credit, and may be the only option for some Canadians, you should be aware of a few disadvantages. First, compared to unsecured cards, secured credit cards tend to have higher interest rates (above 19.99%). You are also required to give a security deposit and you cannot access these funds while you have the card. Some lenders may also ask you to pay a setup fee, which is a small percentage of your credit limit (i.e. 3.00% of $1,000 = $30 setup fee). These measures aren’t meant to deter you from applying or using the cards; they are simply put in place so you can prove you are serious about being a responsible borrower.
How much is a security deposit on a secured credit card?
The size of your security deposit is largely up to you, but providers will have minimum and maximum amounts they'll allow. Minimum security deposits can range from $50 to $500, whereas the maximum deposit on most secured cards is usually around $10,000.
What happens to my security deposit on a secured credit card?
While you cannot access the security deposit while you have the secured credit card, your deposit can be placed in a guaranteed investment certificate to collect interest, which will later be returned to you, when your credit improves and you qualify for an unsecured credit card.
In most cases, to get your deposit back, you must simply close the account and it will be returned to you within 60 days (providing you don't have any outstanding balances or pending fees).
How do I increase my limit on a secured credit card?
In most cases, you can increase your credit limit on a secured card by simply adding more funds to your security deposit. The more you put up front, the more you can spend on the card. That being said, if you've already reached your provider's maximum allowable deposit, you won't be able to go beyond that.
How long do you have to use a secured credit card?
If you use your secured credit card responsibly (i.e. pay off your entire balance on time each month), your lender will eventually offer you an unsecured credit card and return your security deposit to you. It could take 12 to 18 months, depending on your prior credit history and how good the lender feels about you as a borrower.
How fast will a secured credit card build my credit?
The answer to this question largely depends on what your credit situation is when you first get the card.
Those with no credit history (for whom this is their first card) will have the easiest time. Providing the card is used responsibly and all bills are paid in full and on time, they can see their credit score grow in as quickly as six months. In some cases, with no bad credit score to repair, they may be able to apply for unsecured cards even earlier.
If you're coming to a secured card with bad credit (especially as the result of bankruptcy or a similar financial setback), you'll most likely have to wait a bit longer. The typical timeline here is more like 12-18 months of consistently positive credit reporting to Canada's credit bureaus. While that may sound daunting at the beginning, with patience and healthy financial habits, you'll get there before you know it.
What's the difference between a secured and prepaid credit card?
While both are very easy to be approved for due to a "cash up front" loading method, the biggest difference between the two is that secured credit cards report your payments to Canada's credit bureaus, whereas prepaid cards do not. What this means is that, while you may be able to use a prepaid credit card like any other unsecured card, you'll never be able to use it to improve your credit score. Secured credit cards, on the other hand, will slowly help your score increase through regular reporting.
The other main difference is in how you load the card. Prepaid credit cards are just how they sound - users load the card with their own cash and use it much like a debit card. Alternately, secured cards require a security deposit up front to match your credit limit. This deposit is something they can use to pay themselves back for an unpaid bill, effectively reducing the risk on their end. Once you close the account in good standing, you'll get your deposit back.
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